DoorDash shares drop as new investment plan unnerves investors

A Doordash delivery bag is seen in New York City. (Andrew Kelly/Reuters via CNN Newsource)

DoorDash shares dropped nearly nine per cent in premarket trading on Thursday as the company’s aggressive plan to invest several hundred million dollars more in 2026 in the face of cost pressures unnerved investors.

The San Francisco-based company also missed Wall Street estimates for third-quarter profit due to rising expenses.

DoorDash has ramped up investments on partnerships - including with Domino’s Pizza, retailer Kroger and robotics firm Serve Robotics - as it broadens its last-mile delivery offerings to reach a wider customer base.

J.P.Morgan analysts said the sell-off in the shares was due to its investment plan.

“Incremental investments create near-term margin pressure,” the analysts said.

The company, whose shareshave gained about 42 per cent so far this year, said total costs and expenses for the third quarter rose about 23 per cent to US$3.19 billion a year ago.

These partnerships, however, helped the company beat quarterly revenue estimates and forecast fourth-quarter gross merchandise value above Wall Street expectations.

However, some analysts pointed that the additional investments should not come as a ‘surprise’, given the company’s history of aggressive investing and delivering returns.

“We don’t view these investments to come as a change in investment philosophy as DoorDash is taking the profit pool in its core US restaurant business and Deliveroo and re-investing in growth,” Morgan Stanley noted.

Earlier this year, DoorDash acquired British rival Deliveroo in a $3.9 billion deal.

(Reporting by Joel Jose in Bengaluru; Editing by Leroy Leo)